Agricultural flat rate scheme (AFRS) ― operating the scheme

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

This guidance note covers how to operate the agricultural flat rate scheme (AFRS). The scheme is sometimes also referred to as the famers’ flat rate scheme and the flat rate scheme for farmers.

For an overview of the AFRS more broadly, see the Agricultural flat rate scheme (AFRS) ― overview guidance note.

For in-depth commentary on the legislation and case law relating to the operation of the AFRS, see De Voil Indirect Tax Service V2.194 and V2.197.

Operating the AFRS - the basics

A farmer operating the agricultural flat rate scheme (AFRS) does not recover input tax on their business costs. Instead, it charges a flat rate addition of 4% on its farming activities when it makes supplies to VAT registered customers. The farmer retains this addition, in effect compensating for the lack of VAT recovery.

The VAT registered customer who is charged the flat rate addition may also recover this as if it were normal input tax.

No VAT or flat rate addition is charged by the farmer

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